FLASHBACK: Steve Ballmer's First Take On The iPhone, January 2007

INTERVIEWER: ... The Zune was getting some
traction. Then Steve Jobs goes to MacWorld and he pulls out this
iPhone. What was your reaction when you saw that?

STEVE BALLMER: 500 dollars? Fully
subsidized? With a plan? I said that is the most expensive
phone in the world. And it doesn't appeal to business
customers because it doesn't have a keyboard. Which makes
it not a very good email machine.

INTERVIEWER: How do you compete with that,
though? He sucked out a lot of the spotlight...

STEVE BALLMER: Let's take phones first. Right
now, we're selling millions and millions and millions of phones a
year. Apple is selling zero phones a year. In six
months, they'll have the most expensive phone by far ever in the
marketplace...